Active Inertia

Many leading companies plummet from the pinnacle of success to the depths of failure when market conditions change. Because they’re paralyzed? To the contrary, because they engage in too much activity—activity of the wrong kind. Suffering from active inertia, they get stuck in their tried-and-true activities, even in the face of dramatic shifts in the environment. Instead of digging themselves out of the hole, they dig themselves in deeper.

Such companies are victims of their own success: they’ve been so successful, they assume they’ve found the winning formulas. But these same formulas become rigid and no longer work when the market changes significantly. When companies understand that action can be the enemy, they are less likely to join the ranks of the fallen. Before asking, “What should we do?” and rushing into action, managers should ask, “What hinders us?” They should look deeply at the assumptions they make about their business and industry. And they should pay particular attention to hallmarks of active inertia: strategic frames becoming blinders, processes hardening into routines, relationships becoming shackles, and values hardening into dogmas.

When business conditions change, the most successful companies are often the slowest to adapt. To avoid being left behind, executives must understand the true sources of corporate inertia.

One of the most common business phenomena is also one of the most perplexing: when successful companies face big changes in their environment, they often fail to respond effectively. Unable to defend themselves against competitors armed with new products, technologies, or strategies, they watch their sales and profits erode, their best people leave, and their stock valuations tumble. Some ultimately manage to recover – usually after painful rounds of downsizing and restructuring – but many don’t.

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